Tax Debt: IRS Collection Methods

Last updated on October 17, 2022

Tax debt seems difficult to resolve, but it can become simple with correct planning. Before the actual process of resolution begins, taxpayers need to understand the basic policies of the IRS, the particulars of their case and how it can impact resolution, and the basics of tax laws that have an impact on their case. Taxpayers that want to use outside help will need to research and choose a competent and legitimate tax help. IRS tax debt can be resolved easily by taking correct actions right from the beginning.

Tax Debt: IRS Lien  

Another important factor when considering tax debt resolution is IRS collection actions. Federal tax lien and levy are the most aggressive collection actions of the IRS. Under tax lien, the IRS seizes the property and/or assets of a taxpayer with tax debt to secure payment of the debt. It damages a taxpayer’s ability to take credit in future. The first step in getting a lien removed is to resolve tax debt as soon as the IRS places the lien.

The IRS insists full payment of tax debt to get a lien removed, but taxpayers who cannot afford to pay in full can explore other options. The IRS releases a lien within 30 days after the full payment of tax debt.

Tax Debt: IRS Levy

Tax levy is the most powerful of all IRS collection actions. A levy sells the property and/or assets of taxpayers to fulfil a tax debt. If a taxpayer makes no efforts to resolve tax debt even after the placement of tax lien, the IRS sells the seized property and/or assets to fulfil the entire or a part of the tax debt.

Taxpayers should know that there are various methods to resolve IRS tax debt, including tax debt reduction plans and postponement of payment. Even if they cannot pay their entire tax debt, they must resolve their case to avoid IRS collection actions.

IRS Tax Debt Notices

It is best to begin the resolution process after receiving the first IRS notice regarding tax debt. Even though the IRS usually seeks to get the entire tax debt amount in a single payment, taxpayers should explore various payment plans such as Installment Agreement, Offer in Compromise, and Partial Payment Installment Agreement before contacting the IRS regarding the resolution of tax debt.

A definite advantage of resolving back taxes early is paying less in penalties and interest. As a tax debt case remains unresolved, the IRS keeps charging penalties and interest on the back tax amount. Over time, the total tax debt grows substantially, making it more difficult for taxpayers to pay it. Therefore, taxpayers must make early efforts to resolve back tax and get back into tax compliance.